GE’s Immelt Armed With Sweetened Alstom Offer for Hollande Talks

Jun 19, 2014 7:38 pm ET

June 20 (Bloomberg) -- Jeffrey Immelt is poised to make his case to French leaders that General Electric Co. really has sweetened its offer for one of the country’s industrial icons.

Three weeks after lobbying lawmakers for the acquisition of Alstom SA’s energy assets, GE’s chief executive officer meets today with President Francois Hollande to win France’s backing and head off a Siemens AG-led counterproposal. This time, he will have the revised terms of an Alstom deal to meet demands for job guarantees and concessions on energy independence.

The original $17 billion bid will be pared as GE sells its rail-signaling operations to Alstom, which in turn will keep a stake in joint ventures being formed in power grids and renewables, Immelt said yesterday in Paris, without giving a figure. GE and Alstom also will create a nuclear-energy partnership under the revised plan.

GE’s offer is “a significant improvement,” French Finance Minister Michel Sapin told reporters in Luxembourg. “This shows the government was right to intervene. Happily, we acted.”

France’s government is now evaluating the proposal from Fairfield, Connecticut-based GE and one from Siemens, Sapin said yesterday. GE said its new proposal doesn’t change the valuation of the energy assets from Alstom, which is based in the Paris suburb of Levallois-Perret.

“It really comes down to: Does this new offer have enough in it to satisfy the French government?” said Christian Mayes, an Edward Jones & Co. analyst based in Des Peres, Missouri, who rates GE as hold. “From the government’s perspective this may look like an improved offer, even though financially it may not look that different.”

Immelt’s Quest

The Paris meetings today for Immelt, 58, will extend his campaign on behalf of the Alstom deal, a push that includes discussions with Hollande and a May 27 visit to the National Assembly. GE’s pledge to add 1,000 local industrial jobs, which was renewed yesterday, was made when Immelt spoke with Hollande last month, a person familiar with the matter said at the time.

Hollande also will confer today with representatives from Siemens and partner Mitsubishi Heavy Industries Ltd. after a session with his cabinet on the Alstom deal, according to a statement from the presidential office.

GE and Siemens are vying for the Alstom operations that make turbines and power-transmission equipment. GE made a binding, all-cash bid on April 30, and Alstom said it would consider proposals before a June 23 deadline.

Montebourg’s View

Economy Minister Arnaud Montebourg, who has been critical of GE, told Alstom union representatives that Siemens and Mitsubishi had improved the bid they made earlier this week with Hitachi Ltd., which valued the Alstom energy assets at 14.2 billion euros ($19.3 billion). That plan also envisioned merging the train operations of Siemens and Alstom.

Under the new proposal, Mitsubishi would offer to buy 40 percent of Alstom’s grid and renewables units instead of 20 percent, and Siemens would offer to create a rail-signaling joint venture with Alstom, said Claude Mandart, a representative of the CFE-CGC union who met with the minister.

Montebourg told union members the new bid would be an 800 million euro improvement over the previous Siemens-Mitsubishi offer, Mandart said in a telephone interview. He said it wasn’t clear whether that figure was to be applied to the valuation of the deal or just to the cash payout to Alstom.

Alexander Becker, a spokesman for Munich-based Siemens, declined to comment.

GE’s Revision

Under GE’s latest plan, the U.S. company and Alstom each would hold 50 percent stakes in the power grids and renewables ventures. The deal structure, including the sale of the signaling business, could reduce GE’s cash payment by about 25 percent to 30 percent, according to Nicholas Heymann, a New York-based analyst at William Blair & Co.

Alstom fell 6 percent yesterday, the most since January, to 27.70 euros in Paris, while Siemens gained 1.1 percent to 99.94 euros. Fairfield, Connecticut-based GE rose 1 percent to $26.93 at the close in New York.

GE and Alstom signed a memorandum of understanding to create a global alliance in transportation that would let the French company expand in North America and add freight clients. The deal includes the sale of GE’s rail-signaling business to Alstom and agreements in services, technology, supply chain, manufacturing and commercial support. Alstom’s TGV high-speed trains aren’t part of GE’s planned acquisition.

“GE’s freight-signaling business is highly complementary to the transit-signaling business of Alstom,” said Heymann, who rates GE, Alstom and Siemens market perform. “For the French government, it ensures Alstom can become a stronger participant in the global transit rail market.”

While the nuclear venture would also be equally owned, the French state would hold a preferred share to protect the sovereign nature of the country’s nuclear power industry. The government would have “veto and other governance rights” on matters related to nuclear technology and security, GE said.

--With assistance from Helene Fouquet in Paris and Mark Deen in Luxembourg.